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a social grouping designed to achieve certain goals. In the modern world much of the provision of goods and services is undertaken by organizations, and they are the main providers of paid employment. The core features of the modern organization were outlined by Max Weber (1864-1920) in his analysis of BUREAUCRACY. In his view the bureaucratic organization was the dominant mode of organization in modern industrial societies. Organizations of this sort are often also called formal organizations since they exist independently of the individuals who belong to them at any given time, and the roles and activities of organization members are formally prescribed at least to some extent. Informal organization, by contrast, is where the differentiation of roles (for example leader, follower) is not formally specified and where roles emerge naturally Small GROUPS are often referred to as informal organizations. They can be a source of difficulty within formal organizations because their respective roles and goals may conflict.

All formal organizations have a structure of roles and a set of arrangements to achieve the organization's objectives. This is known as the organization's design. It embraces the distribution of tasks that organization members perform and the mechanisms of coordination and control. Design is thus more than the simple lines of AUTHORITY and ACCOUNTABILITY shown in the ORGANIZATION CHART. In ORGANIZATIONAL ANALYSIS three dimensions of structure are usually seen as fundamental:

  1. centralization: the number of levels in the HIERARCHY and the extent to which decisions are taken at the top of the organization;
  2. specialization: the extent to which the total activities of the organization are broken down into specialized jobs for individuals. See JOB DESIGN AND REDESIGN;
  3. standardization: the extent to which the conduct of activities necessary to achieve the organization's goals are controlled and coordinated by standard, written rules.

Organizations differ along these dimensions. Small dynamic organizations in high growth sectors are often characterized by low centralization, specialization and standardization; by contrast, public administration often exhibits the opposite (see MECHANISTIC AND ORGANISMIC ORGANIZATIONS). See WORK ORGANIZATION, ORGANIZATIONAL STRUCTURE, PRODUCT-BASED STRUCTURE, FUNCTIONAL STRUCTURE, MATRIX STRUCTURE, H-FORM, TALL ORGANIZATION, FLAT ORGANIZATION.

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson


the structure of authority or power within a FIRM or public body. Generally, there will be a number of management levels in an organization, with a chief executive at the top of the pyramid-shaped organization and increasing numbers of senior, middle and junior managers further down the hierarchy, operatives, sales people and clerks forming the base of the pyramid. Lines of authority are established by the organization's structure, with orders being transmitted downwards in increasing detail and information feedback being transmitted upwards.

In the traditional THEORY OF THE FIRM, such organizational details are ignored, the firm being portrayed as a simple decisionmaking unit that responds exactly to orders initiated by its controlling ENTREPRENEUR. In practice, the structure and operations of large, complex organizations themselves will affect the decision-making process and the specification of organization objectives. See ORGANIZATION THEORY, BEHAVIOURAL THEORY OF THE FIRM, MFORM ORGANIZATION, U FORM ORGANIZATION, CORPORATE RE-ENGINEERING.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
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